It’s
Time for Greece to Leave the Euro
Jochen Bittner / New
York Times
JULY 7, 2015 /
http://www.nytimes.com/2015/07/08/opinion/jochen-bittner-its-time-for-greece-to-leave-the-euro.html?_r=0
HAMBURG, Germany —
DOES democracy trump debt? Of course not, not even in Europe. No bank
clerk here would be impressed if a family told her that they had
voted to have the terms of their housing loan renegotiated — that’s
not how loans, either personal or international, work. Yet leaders
are gathering for a special summit meeting in Brussels on Tuesday
because the Greeks have done exactly that: voted against the
conditions the eurozone demands for a third bailout program for their
country.
Of course,
negotiations are a good in themselves, especially in Europe. But even
in Brussels, there comes a time when losing your nerve is a rational
choice. I don’t say it lightly, but I believe this point is here
now. Europe has more to lose from a Greece that remains part of the
eurozone than from a controlled exit, in which Greece softly steps
out of the single currency.
Europe is a
contract-based community of states that permanently agree on mutually
beneficial rules, with the finest privilege (for those who do
economically well enough) being membership in the euro club. What now
is the greater threat to this project: a loss of a currency club
member that, in the eyes of many, had been brought on board by
mistake? Or, in scrambling to keep it in, the spread of an attitude
whereby contracts count for little, and rules count for even less?
There was a point
when things looked promising. After the European Union and the
International Monetary Fund stepped in with their first two bailout
programs, Greece made considerable progress on closing its deficits.
Between 2010 and 2014 it implemented spending cuts virtually
unprecedented in a developed country. Those cuts meant hardship to
many in Greece. But they began to pay off: By the end of 2014, Greece
was spending less than it was collecting in taxes (if you leave aside
interest payments).
But the cuts to
social-welfare programs and public-employee salaries also drove up
support for the radical left Syriza government, which took over
earlier this year. It stopped the reforms and blurrily demanded
other, bigger changes, including a “new deal” for all of Europe —
whatever this is supposed to mean.
It may well be that
most of the 61 percent of the Greeks who voted “no” on Sunday to
the latest demands for cuts by the eurozone countries merely want
changes in the details of a new bailout deal with Brussels. Sure,
such demands could be up for debate. Yet it has become hard for those
seated across the negotiating table from Prime Minister Alexis
Tsipras to believe he is interested in a pragmatic solution. The
radicals who back him in Parliament want changes to the currency
system and Europe’s economic model itself. And while he may yet
have a trick up his sleeve, Mr. Tsipras appears intent on using the
outcome of Sunday’s referendum to fuel his crusade against the
chimera of a “neoliberal” Europe.
True, Mr. Tsipras
sacked his controversial finance minister, Yanis Varoufakis. But one
ideologue fewer doesn’t make this government less ideological. As
childish as it sounds, Mr. Tsipras and his fellow fighters are still
raging against the triviality that you can spend only what you earn.
Leaving aside Syriza’s Nazi-Merkel comparisons and accusations of
“terrorist” behavior by creditors, over the past five months
Europe has heard way too much from his government about the
impossibility of further cuts and way too little about possible
sources of new income.
A big part of the
blame for this mess rests on the shoulders of the chancellor of
Germany, Angela Merkel herself. Her statement that “if the euro
fails, Europe fails” was understood by Athens as a carte blanche:
Greece’s euro membership is obviously priceless to Europe’s most
powerful leader. From then on, all credit negotiations between Athens
and the eurozone resembled a poker game with the German cards in the
open. The fail-fail sentence was easily the most stupid public
statement that the usually cautious Ms. Merkel had ever made.
Still, patience with
Greece in her party, the conservative Christian Democrats, is waning
rapidly, as it is in Germany’s staunchest economic allies, the
Netherlands, Finland and the Baltic States. To many Northern
Europeans, both the Greek government and the Greek people have
finally demonstrated that, according to them, no given rule is ever
fixed. This mentality is not just alien to the rather Protestant
northerners. It also holds a danger for Europe’s political fabric.
Right now many
observers are fixated on the risk of Greece’s exiting the euro. But
the risk of keeping it in at all costs is even higher. Consider this
scenario.
Unemployment in
Italy, Portugal and Spain remains high, and anti-European Union
populists are on the rise in all three. The conclusion that people
there could draw from a third bailout program for Greece would almost
certainly be that voting for radical parties and obstructive behavior
are eventually rewarded. You just have to be cocky enough. And if
that happened — if, say, a Syriza clone came to power in Spain, or
if the leadership in those countries expressed a strong sympathy for
Greece’s position — the counterreaction in the creditor countries
could be harsh, even hostile. Europe could end up with a calamitous
north-south divide along camps known from the Cold War: the
“socialists” there, the “capitalists” here.
Neither the eurozone
nor Europe is best served by holding on to Greece. Instead, the
European Union needs to come up with a smooth way out of its dilemma,
namely an orderly exit by Greece from the euro.
This solution will
be expensive, too — among other things, the European Union will
have to make sure that Greece’s post-euro currency isn’t so cheap
that Greeks can’t afford vital imports, like oil and medicine. Yes,
Greece still must be rescued. But no, it need not be rescued within
the eurozone.
Jochen Bittner is a
political editor for the weekly newspaper Die Zeit and a contributing
opinion writer.
For
Europe’s Sake, Keep Greece in the Eurozone
By THE EDITORIAL
BOARD / New York Times
Credit Andrew Holder
The resounding
victory for the “no” vote in Greece’s referendum has left
European leaders like Chancellor Angela Merkel of Germany with a
stark and clear choice. Only they have the power to decide what
happens next — whether to shove Greece out of the eurozone or offer
some path forward for the Greek economy, starting by writing down its
huge and unpayable debts.
Greece has suffered
and will continue to suffer: its unemployment rate is over 25
percent; its gross domestic product has fallen by a quarter since
2008. What the past several years have shown is that suffering and
austerity did nothing to help Greece or its creditors. And no more
moralizing and punishment at this point will change that reality.
Ms. Merkel, the most
powerful political leader in Europe, now has to decide whether she is
willing to risk the stability of the European Union, consign Greece
to economic depression and threaten global financial markets, or do
the rational thing at this critical moment.
Leaders of the
eurozone will meet Tuesday to discuss their options and consider a
new proposal from Prime Minister Alexis Tsipras of Greece. They will
have to act quickly because Greek banks are running out of cash after
the government shut them down and imposed capital controls a week
ago.
From an economic
perspective, it is clear what Europe’s leaders should do. They need
to restructure Greece’s total debt of 317 billion euros — about
177 percent of its G.D.P. — and keep the country, a member of the
European Union and NATO, in the eurozone.
Letting the country
leave the euro will, of course, hurt Greece by making its banks
insolvent and bringing most economic activity to a halt while the
government issues new scrip, most likely followed by a return to a
greatly devalued drachma. Nobody really knows how bad things will get
in that scenario. That’s why Mr. Tsipras and the leaders of other
Greek political parties said on Monday that they wanted the country
to stay in the eurozone.
A Greek exit would
also do untold damage to the credibility of the euro and the European
project by making clear that any country’s membership in the
eurozone could be revoked. That might not be an immediate concern for
other economically weaker countries like Italy, Portugal and Spain,
given that yields on their government bonds increased only modestly
after the Greek vote. But the specter of more exits from the eurozone
would undoubtedly make it hard for European leaders to respond to
future crises.
Those against debt
relief have argued that saving Greece would merely reward a
government that has failed to reform its inefficient economy. But
that is a self-serving misreading of what happened in the crisis. It
was European leaders and the International Monetary Fund that made
the biggest error in 2012 when they only partially restructured
Greece’s debts, a lot of which were owed to banks in Germany and
the rest of Europe.
François Hollande
and Angela Merkel on Monday. Credit Thibault Camus/Associated Press
They compounded the
problem by demanding that the country cut spending and raise taxes.
That depressed a weak economy and drove up unemployment, making
growth and increased revenues impossible. In their most recent
proposal, Greece’s creditors sought even more cuts to already
modest government pensions, which would lead to further economic
contraction.
Yes, Greek officials
past and present are responsible for many of their country’s
problems. But European leaders have made the crisis worse by their
mismanagement. Now it’s incumbent on them to end the threat to the
eurozone by saving a small, paralyzed country.
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